(PUB) Investing 2016

13

June 2016

Morningstar FundInvestor

Quality Leads Jensen to the Top Leaders & Laggards | Andrew Daniels

Protected Securities. In addition, security selection in the investment-grade U.S. bond space has been strong. Laggards Neutral-rated FPA U.S. Value FPPFX has lagged 98% of its large-blend peers thus far in 2016 . Manager Gregory Nathan has given significant overweightings to the poor-performing consumer discretionary and healthcare sectors, and stock selection within those sectors has also been weak. Over-the-counter drug producer Perrigo PRGO is down 33% this year after its CEO left to join Valeant Pharmaceuticals VRX . Auto manufacturers Daimler DAI and Bayerische Motoren Werke BMW are both down more than 15% . to date. Managers David Herro and Rob Taylor ply a value-oriented philosophy that can look contrarian at times. Currently, that philosophy leads them to be heavy in the hard-hit financials and consumer discre- tionary sectors. Top financials investments such as Credit Suisse CSGN and Nomura Holdings NMR are down more than 23% this year. In the consumer discretionary space, the fund has been hurt by giving an overweighting to the automobiles industry— holdings Honda Motor HMC , Daimler, Toyota TM , and BMW are down double-digits this year. Silver-rated Fidelity Capital & Income FAGIX has lagged 92% of its high-yield-bond peers in 2016 . With often sizable allocations to equities and lower-rated bonds, this fund is one of the most aggres- sive options in the high-yield bond Morningstar Category. That hurt the fund in early 2016 , as global risk assets sharply sold off, and it hasn’t been able to recover. Furthermore, the fund has a sizable position in Allergan AGN , which fell after its planned merger with Pfizer fell apart. K Contact Andrew Daniels at andrew.daniels@morningstar.com Gold-rated Oakmark International OAKIX has trailed 95% of its foreign large-blend peers for the year

Leaders Jensen Quality Growth JENSX has outperformed 99% of its large-growth peers for the year to date. The managers’ close eye on quality and valuations lead this fund to lag in risk-fueled bull markets, but it does better in choppy markets, as has been the case in 2016 . The fund, which has a Morningstar Analyst Rating of Silver, has benefited from strong security selection in the healthcare sector— Stryker Corporation SYK and UnitedHealth Group UNH are both up more than 14% this year. In addition, some of its largest holdings in the technology and industrials sectors—such as Accenture ACN and 3M MMM —have contributed to results. Bronze-rated Seafarer Overseas Growth and Income SFGIX has posted great results since opening in 2012 , and it continued that strong showing in 2016 by outperforming 90% of its diversified emerging- markets peers. Lead manager Andrew Foster invests in a mix of dividend-paying common and preferred stocks and convertible and other bonds, which helps the fund do well in down and choppy markets. Big technology holdings such as Arcelik ARCLK and Infosys INFY and healthcare holdings such as Odontoprev ODPVY and Hisamitsu Pharmaceutical HPX have posted double-digit returns. The fund has also benefited by giving an underweighting to hard- hit financials, and those it does own—such as Bolsa Mexicana de Valores BOMXF —have done well. Gold-rated Fidelity Total Bond FTBFX has outperformed 96% of its intermediate-term bond peers in 2016 . Manager Ford O’Neil and his team make the most of the fund’s wide mandate, investing in high-yield, emerging-markets, and international bonds in addition to investment-grade U.S. bonds. Results have been driven by overweighting strong-performing high-yield and emerging-markets bonds and Treasury Inflation-

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Ten Worst-Performing Funds Fund Name YTD Cat Rank % Matthews China Investor 100 Oakmark Global I 99 Scotia Dynamic U.S. Growt 99 Sequoia 99 FPA US Value 98 Touchstone Sands Capital 98 Fidelity Low-Priced Stock 97 Janus Contrarian T 97 Natixis ASG Global Altern 97 Oppenheimer Global A 97 Artisan Value Investor Champlain Mid Cap Adv 1 Fairholme Focused Income 1 Jensen Quality Growth J 1 Longleaf Partners 1 Longleaf Partners Small-C 1 Mairs & Power Growth Inv 1 Mairs & Power Small Cap 1 Manning & Napier Equity S 1 Permanent Portfolio Perma 1 1